2024 (12) TMI 560 - AT - Income Tax

Disallowance of loss incurred by the appellant in stock option transactions - AO raised concerns that the options were sold at unreasonably low prices even below their intrinsic value - HELD THAT - As observed that the assessee sold options significantly below their intrinsic value. AO merely expressed an opinion and did not bring any comparative transactions on record to substantiate the claim in relation to the assessee s transactions. AO s conclusion appears to be based solely on conjecture without any corroborative evidence. The transactions in question were conducted through the stock exchange as evidenced by the contract notes as duly submitted. The entire transaction was carried out on the Bombay Stock Exchange (BSE). Additionally the ledger account of Odyssey Broker for the financial year 2014-15 was also provided. Despite this the revenue authorities neither rebutted nor challenged the authenticity of the submitted documents. No independent verification was conducted by the Ld. AO prior to making the addition. The assessee discharged their burden of proof by submitting all relevant documents supporting the transaction. The onus then shifted to the revenue authorities who failed to bring any comparative data or evidence to substantiate their claims regarding the assessee s stock option transactions. Accordingly the impugned appellate order is set aside and the addition is hereby deleted. Decided in favour of assessee.

Issues:
1. Validity of reassessment proceedings under section 147 of the Income-tax Act.
2. Jurisdiction of the Assessing Officer to pass the assessment order without disposing of objections.
3. Disallowance of loss incurred in stock option transactions.

Analysis:
1. The appeal was filed against the order of the National Faceless Appeal Centre, Delhi, upholding the reassessment proceedings under section 147 of the Income-tax Act for Assessment Year 2015-16. The appellant contended that the reassessment proceedings were invalid as the requirements of Section 147, 148, and 151 of the Act were not met. The appellant sought to quash the assessment order dated 20.09.2021.

2. The appellant challenged the legal validity of the assessment order under section 147 read with Section 144B of the Act, asserting that the Assessing Officer lacked jurisdiction to pass the order without addressing the objections raised by the appellant. The appellant argued that the CIT(A)'s finding that no objections were raised was incorrect. The appellant requested the quashing of the assessment order on this ground.

3. The dispute also involved the disallowance of a loss of Rs. 1,10,53,250 incurred by the appellant in stock option transactions. The appellant contested the disallowance and sought its deletion. The appellant provided detailed evidence and documentation to support the genuineness of the loss incurred in stock exchange transactions.

4. During the proceedings, the Assessing Officer disallowed the loss, treating the transactions as non-genuine. The appellant submitted relevant documents and evidence to substantiate the genuineness of the loss. The CIT(A) upheld the disallowance, emphasizing the appellant's failure to discharge the burden of proof. However, the Tribunal found that the Assessing Officer's conclusion was based on conjecture without corroborative evidence. The Tribunal noted that the appellant had submitted all relevant documents, which were not challenged by the revenue authorities.

5. The Tribunal observed that no independent verification was conducted by the Assessing Officer, and the revenue authorities failed to provide comparative data or evidence to support their claims regarding the stock option transactions. Consequently, the Tribunal set aside the appellate order and deleted the addition of Rs. 1,10,53,250, as the appellant had successfully demonstrated the genuineness of the loss incurred in stock exchange transactions.

6. Ultimately, the Tribunal allowed the appeal, as the appellant succeeded on the merits of the case. The legal grounds and additional ground raised by the appellant were deemed academic in light of the Tribunal's findings. The Tribunal pronounced the order in favor of the appellant on 09th December 2024.

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